Expect mediocre earnings, while these areas outperform: Doll

The market can expect a mediocre earnings season in the midst of a gradually improving economy, but dynamics are changing and investors should look to several key areas for outperformance, said Bob Doll, chief equity strategist at Nuveen Asset Management.

"We've moved past the P/E driven phase of this market for now, which has powered us," Doll told "Squawk on the Street" Wednesday. "Now it's going to be up to earnings. I don't think we're going to get a lot of margin expansion, so then it comes to revenues."

"I think earnings will be OK, not great, good enough. I think we will waffle around in the market's trading range," he said. "Earnings don't have to be great, they just can't disappoint."

Doll said that unlike last quarter, when the Federal Reserve helped bolster markets, with a plan to taper asset purchases on the horizon, markets are expecting less support. In addition, lowered expectations last quarter added to the likelihood that companies would beat earnings, which is less apparent this time around.

"If we're going to have substantial increases in equity prices, it has to be earnings and revenues as well, which requires a somewhat better economy," he said. Factors like improving consumer confidence and slightly better capital expenditures should help the broader economy, he added, as well as conditions in Europe that are "less bad."

"I think we have an economy that is OK. I'm not going to pound the table, but OK," he said.

Because of this strength, Doll expects U.S.-focused stocks in the S&P 500 to outperform those in the index that have more operations overseas, "in part, because of currencies."

This year, Doll explained that new money for equities has come from overseas, but there is "almost no evidence that money has come out of bonds and gone into stocks," although he expects that this rotation will eventually happen with an improving economy.

"Until investors see stocks going up and bonds going down, they're not going to do the great rotation. We're beginning to see a little of it."

"When you can get almost half the companies in the S&P 500 with a higher yield than the 10-year Treasury, I'm not sure equities are a bad place to get not only yield, but some growth in that yield," he added.